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An assessment of Lynk & Co features and brand-fit to uncover entry

possibilities at the Danish market HD(IB) Final project

Spring 2019

Author: Elias N.V. Poulsen Counselor: Kristian Sørensen

Pages: 135

Page keystrokes: 129.297

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Executive summery

The technological development in the world is changing the way automotive companies approach markets. The automotive industry has been evolving slowly compared to other BTC industries and in the light of digitalization and powertrain technology, companies are now seeing the possibilities of harvesting the benefits derived from digitalization.

The thesis will explore areas within business modelling, technological development, innovation management and further explore, based on research whether the Danish market/consumer is ready for a change in the fundamental way of thinking cars with reference to Lynk & Co as case company. In other words, an assessment of the possibilities to enter the Danish market based on the three mentioned topics.

In order to gain relevant insight into the industry, several expert interviews have been conducted. Qualified knowledge of market and trends derived from experts, have been used to support findings from a conducted online consumer survey.

Primary data combined with academic literature have been used to explore the opportunities at the Danish market.

The Danish market is dominated by traditional gasoline cars from respectively VW,

Peugeot and Toyota (Top 3). EV´s and PHEV’s are sold on a limited basis and are still in the introductory phase. Nevertheless, an increased focus on environmental awareness in Denmark drive a trend toward EV´s/PHEV´s.

It has been identified that the industry has an increasing focus on four topline areas:

1) More Fuel-Efficient Rides = Hybrids and EV’s

2) Predictive Vehicle Technology = Artificial Intelligence, IoT and data 3) Cars-as-a-Service (CaaS) = Car-sharing

4) Self-Driving Technology = Autonomous driving

For the Danish market 1-3 are true, whereas autonomous driving is experienced as yet to come. The “connected car” car market is projected to be a $141 billion market in 2020 and new entrants can be expected within the nearest future.

Lynk & Co and Tesla can be considered first-movers due to the fact that they embrace a fully digital and connected car strategy.

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Lynk & Co have an untraditional approach compared to traditional-thinking automotive companies. Several business elements and product features are in line with the consumer demands at the Danish market. It has been identified that the Danish consumer are early adopter of technology and are keen to explore digital solutions. As well as in cars.

The Danish market is affected by a transformation toward flexible solutions. The need for flexibility and ease of use seen from e.g. Mobilepay, Uber, Airbnb etc. are driving the consumer demands in Denmark. Consumers are now used to these types of businesses and companies need to adapt. Hence, an increasing need for digitalization and/or subscription solutions.

The Danish market are characterized by many substituting products/solutions.

The need for a car in urban areas is low, and bikes and mobility solutions seem to cover the need of easy and on-demand pay-as you-go solutions.

Furthermore, new entrants from rental companies are coming to the Danish market as seen with Sixt/BMW (DriveNow) and Europcar (MovOn).

The author estimates that the subscription model has a more sustainable future compared to private ownership. The conducted survey shows that even the consumers that already own a car, would be keen to subscribe instead of owning.

Based on an in-depth analysis of Lynk & Co´s business model and core competences, the author is able to assess its competitive acumen.

Competing on technology alone has been identified as a less sustainable strategy and have to be combined with a business model that are customer-centric and offers flexible solutions.

Lynk & Co have acted on the increasingly use of internet-shopping and are therefore offering online sales with the option to see/feel the car at a wholly owned showroom.

It is though estimated that Lynk & Co takes up too much risk by investing in a wholly

owned showroom in a country that is less likely to earn the ROI due to its small market size.

Therefore, the entry form of a franchise agreement is seen as beneficial in the short run in order to lower risk.

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Table of content

1. Introduction ... 7

1.1 Establishing Lynk & Co on Volvo and Geely ground pillars ... 7

1.1.1 Geely (officially Zhejiang Geely Holding Group Co., Ltd) ... 8

1.1.2 Volvo Car Group ... 8

1.1.3 Lynk & Co ... 8

1.2 Lynk & Co philosophy: ... 10

2. Problem identification and problem statement ... 12

2.1 Problem statement ... 13

2.2 Delimitation ... 13

3. Literature review ... 14

4. Theories and models ... 16

4.1 Overview of theories & models ... 17

4.2 A) The Danish automotive market ... 18

4.3 B) The Technological change ... 18

4.4 C) Business model innovation ... 19

4.5 D) Strategy development ... 20

5. Structure and methodology ... 20

5.1 Structure of thesis ... 20

5.2 Research philosophy ... 22

5.3 Research approach ... 23

5.4 Research strategy ... 24

5.5 Methodical choice ... 24

5.6 Time horizon ... 25

5.7 Data collection ... 25

5.7.1 Interview – Primary data ... 25

5.7.2 Consumer survey – Primary data ... 27

5.7.3 Validity and reliability ... 28

6. The Danish market (Section A) ... 29

6.1 Macro analysis ... 30

6.1.1 Political environment ... 30

6.1.2 Economic and demographic environment ... 31

6.1.3 Social and Cultural environment ... 33

6.1.4 The technological environment ... 35

6.1.5 Environmental environment ... 35

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6.1.6 Legal environment ... 36

6.2 Competition within the Danish car market ... 36

6.2.1 Competitive situation within the car industry ... 37

6.2.3 Rivalry in the industry ... 38

6.2.4 Buyers' bargaining power ... 40

6.2.5 Competition from substituting products ... 40

6.2.7 Bargaining power of suppliers ... 42

6.2.8 The threat from new providers ... 43

6.3 Sub conclusion ... 43

7. The technological change and its impact on the automotive industry (Section B) ... 46

7.1 The technological progress within the automotive industry ... 46

7.2 Innovation based on technology ... 48

7.3 Core competences ... 51

7.4 First-mover advantage ... 52

7.5 Sustainability of competing on technology ... 53

7.6 The influence of technology derives a mobility/flexibility demand ... 55

7.7 Data is king ... 56

7.8 Sub conclusion ... 57

8. Business model innovation (Section C) ... 58

8.1 What is a business model and why is it important ... 59

8.2 Assessment of Lynk & Co business model to fit the Danish consumer ... 61

8.3 Identifying value elements through value chain analysis of Lynk & Co ... 64

8.4 Sub conclusion ... 65

9. Identification of value drivers ... 67

9.1 Assessment of value drivers to form actionable issues ... 68

10. Market entry strategy considerations ... 69

10.1 Argumentation for internationalization in relation to Lynk & Co ... 69

10.2 Entering Denmark as new market ... 70

10.3. How to enter Denmark ... 71

10.4 Competing on differentiation ... 75

10.5 Sales potential ... 76

11. Conclusion ... 79

12. Bibliography ... 82

12.1 Scientific journals ... 82

12.2. Books ... 85

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12.4. Business reports ... 91

12.5 Previous assignments ... 92

Appendix - Interviews ... 93

Appendix 1- Interview with Sebastian Hammer, Marketing Manager – Lynk & Co ... 93

Appendix 2: Interview with Jan Walsøe, Former Sales Director, (Porsche and Mercedes) ... 95

Appendix 3 – Interview with Torben Kudsk, Director of FDM ... 98

Appendix 4 – Kristian Mehlsen, Consultant, Copenhagen Institute of Future Studies ... 101

Appendix – Presentations ... 104

Appendix 5 – Presentation from Kristian Mehlsen, Copenhagen Institute of future studies ... 104

Appendix – Emails ... 104

Appendix 6 – Jan Walsøe on how to have success on the Danish market ... 104

Appendix – Models ... 105

Appendix 7 – Value chain of Lynk & Co ... 105

Appendix – Online survey ... 105

Appendix 8 – Online survey with consumers ... 105

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1. Introduction

The automotive market has been synonymous with traditional thinking for years and is now forced to think more creatively.

An industry in stagnation for years is now affected by the technological development in the world and forced to make changes to its core business in order to keep up with consumer demands.

Digital integration into products in general has driven a lot of the growth in companies worldwide which both is an effect of consumer demands and internal efficiency goals.

Trends toward “connected cars” are on the rise and a growing number of suppliers and manufacturing companies are investing heavily to increase their core competences to match this.

A personal interest in Lynk & Co is the driving factor for initiating this research due to the fact that the company is taking a different and more innovative approach to competing on the automotive market. An effect of lacking consumer-centric approaches and outdated business models is of interest and Lynk & Co are approaching this in their own way. The thesis will explore areas within business modelling, technological development, innovation management and further explore, based on research whether the Danish market/consumer is ready for a change in the fundamental way of thinking cars with reference to Lynk & Co as case company.

1.1 Establishing Lynk & Co on Volvo and Geely ground pillars

Lynk & Co was founded in 2016 as a joint venture with Chinese “Geely” and Swedish

“Volvo”. The mix of Chinese and Swedish expertise is linked within Lynk & Co. and is a derived effect of a Sino-Euro agreement that included sharing of technology and the establishment of Lynk & Co, with technological exploration and innovation as the centre of focus.

Background information on the two participating entities in the joint venture is being described with the purpose of giving the reader an overview of what the two companies bring to the table.

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1.1.1 Geely (officially Zhejiang Geely Holding Group Co., Ltd)

Geely Auto Group is a global automotive manufacturer that develops and manufactures cars like Lynk & Co, Geely Auto, PROTON, and Lotus. (Geely.com, 2019)

Brands like these take advantage of Geely’s commitment to sustainability and innovation by its tremendous investments above industry average in R&D and green initiatives. Geely also manages five other sub-businesses which include Volvo Car Group, Geely New Energy Commercial Vehicle Group, Geely Group (New Business) and Mitime Group that develop, manufacture and sell cars, motorcycles engines, lithium battery technology, flying cars, powertrains, investments in education and more. Geely saw a 63% increase in sales volume from 2016-2017 (1,244,000 units) whereas the new sales target was set to 1,580,000 million units for 2018.

This research will only focus on the joint venture establishment of Lynk & Co, but for the sake of the reader, this background information is in its place to picture Geely’s significant size, know-how and power to the collaboration between Geely and Volvo.

1.1.2 Volvo Car Group

Volvo Car Group includes two car brands such as Volvo and Polestar. Volvo is known for its well-known and respected luxury cars. Polestar became an independent car brand in 2017 that focused on high performance electrified cars. Volvo Car Group has suffered from internal changes for the last 10 years, whereas the ownership turned to Geely, bought from Ford Motors back in 2010.

In recent years the internal focus has been centred around electrification, innovation and sustainability. In 2025 Volvo expects to have half of its global sales coming from fully

electric cars. Volvo has a focus on making life easier, safer and better with the use of cutting-edge technology.

1.1.3 Lynk & Co

Lynk & Co is established to both explore the market for connected cars whereas digital integration grants multiple possibilities that need exploration and further to

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provide economies of scale that will allow them to more rapidly develop next generation hybrids and electrified vehicle technology (media.volvocars.com, n.d.). Hence the focus of connectivity and collaboration, the name “Lynk & Co” is a synonym that pictures the focus of the company. Lynk & Co aims at being the most connected car in the world, due to the fact that it is a brand that is born digital without any internal transformation needed.

In other words, the focus has been digitalization from day one.

The purpose of many joint-ventures is “to harvest and pool resources and furthermore coordinate efforts to gain competitive advantages that was not obtainable outside of a strategic partnership” (Bartlett, Beamish, 2011). Volvo and Geely both have specific capabilities that they master, which will be further exploited within the new constellation of Lynk & Co.

The automotive market is changing towards taking new risks compared to traditional automotive market-thinking. This requires automotive companies to think out of the box and create either new competences through own inventions or to enter into strategic partnerships/joint ventures like the one between Geely and Volvo (Elias N.V. Poulsen, 2019). Like for instance, The CMA platform (Compact Modular Architecture) were invented by Volvo and can be seen as an example of utilizing know-how and competences

between the parties. Furthermore, the production facilities at Geely in China function as the production plant for the Chinese market and the Volvo plant in Belgium serves the European market, hence Lynk & Co is exploring economies of scale/reduction of risk and access to China as the biggest and fast-moving car market in the industry (Bartlett, Beamish, 2011).

“A new car brand will catch up with the new digital customers who do not necessarily want to own the car”, as written on (Theverge.com, 2016).

Lynk & Co will manage its operations from the headquarter in Goteborg, Sweden. The site is called CEVT (“The China-Euro Vehicle Technology Centre”) and is employing around 2.000 people, both upstream and downstream in the value chain. A considerable size of the employed engineers comes from Volvo and Saab (fdm.dk, 2016).

The brand and its communication are very vibrant, urban and target the young tech savvy consumers that are born digital and in theory have lower barriers for technological products.

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1.2 Lynk & Co philosophy:

In order for the reader to get a sense of all the new car features and philosophies of Lynk

& Co, a presentation of each new innovative attribute is needed.

The impact on the consumer and the world will be analysed in the later sections regarding business modelling and the use of technology.

Due to the brands innovative approach to serving the consumer, Lynk & Co have

developed various new business approaches and features that are developed based on deep research within consumer behaviours.

Based on a statement from Lynk & Co Marketing Manager, Sebastian Hammer; “the Lynk

& Co philosophy/features serve a gap in the demographic marked who values connectivity and are participants in the sharing economy” (Elias N.V. Poulsen, 2018).

Lynk & Co will offer a different approach to buying cars compared to the traditional retail model of having physical stores to reach consumers.

Lynk & Co will focus on selling the cars online, due to the fact that the target audience (young millennials) see significant more value in buying online (Salesforce.com, 2015).

This is also due to the trend of “convenience” (7-Eleven, pre-maid food, door-to-door delivery). Similar to Tesla, Lynk and Co will launch minor manufacture-owned showrooms throughout European cities like London, Amsterdam, Brussels, Berlin and Barcelona in order to supplement the online sales (Motor1.com, 2018).

Using Volvo dealerships in regard to servicing and maintenance, will generate substantial savings in comparison to the old retail model of fully-owned shops.

Another consumer insight is that many consumers value other transportation possibilities like “pay-as-you-go” options throughout a city. In other words, the trend of owning a car has declined within the young segment (Motorringresearch.com, 2016). Lynk & Co are reacting to this insight by offering supplementary options in the form of subscriptions and shared membership services.

Furthermore, due to the rise of the sharing economy, Lynk & Co is the first car brand to provide a “digital sharing key” that can be used to lend out the car to family members or

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even produce income by renting the Lynk & Co car out to whoever they want. (Ibid)

Whereas all of this is operated on Lynk &

Co own smartphone app. Lynk & Co aspire to become the most connected car brand in the world whereas this is also a statement that is being used in external communications.

Having connectivity build into cars grants multiple new product features that elevate the consumer experience. Based on a report from the global consultancy McKinsey,1 in 5 cars will likely be connected to the internet in 2020 (McKinsey rapport, 2013).

Being first mover and developing features is of essence.

One essential and very important feature is the app store of Lynk & Co.

Developers can make apps within the open source system that Lynk & Co is providing. The consumer then has the option to select apps from a wider and more personalized

selection. The old way of thinking with closed systems are about to shift to a more collaborative minded setup, where companies can initiate partnerships to elevate the consumer experience (Elias N.V. Poulsen, 2018).

It’s important to mention that Lynk & Co are first movers on various features, but nevertheless also have features included that other brands themselves have incorporated.

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2. Problem identification and problem statement

The global landscape has changed significantly over the years and especially technology have managed to play a major part with its exponential growth since the 90’s. “New inventions have fuelled fantasies and shaped human society”, as written in a recent Google Blog post (Blog.google, 2019). All from envisioning and dreaming about creations to implementing these through the use of human hand and mind. (Ibid)

Terminology like incremental and disruptive innovation are popping up all over the business landscape with new ground-breaking solutions to either ease the everyday lives of consumers or to optimize businesses through the use of technology.

The car industry has likewise changed over the years but have had a late start of its

exploitation of digital technology. Automotive companies have been focusing on design, performance and lately on sustainable alternatives to fuel, hence the huge increase in electrified vehicles. Whereas the digitalization is in its early stages within the automotive industry but are maturing fast in line with the technologies available. On top of the digitalization within the automotive industry, carmakers have to adjust to the new consumers that are used to the conveniences that digitalization derives. New business models and new digital solutions within the automotive industry are all effects of the technological development but are consumers necessarily in need of these solutions and are their everyday patterns in regard to using a car ready to be challenged by the new solutions created from digitalization?

The Nordic region, including Denmark have been known for being strong adapters of technology, but is it furthermore profitable to introduce a new car brand to the Danish consumers without assessing the market potential and fit between car brand and

consumer. Most likely not, therefore this research is set out to study the market fit of Lynk &

Co with the Danish market by assessing the Danish willingness to receive the benefits of digitalization and whether or not an entry could be profitable.

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2.1 Problem statement

Based on the above problem identification, the problem statement created explore the following question:

How can Lynk & Co enter the Danish market, based on technological advantage and Business model innovation?

Based on the above, the following research questions will be answered:

- What external factors should Lynk & Co be aware of in order to enter the Danish marked?

- How is the technological development in the automotive industry?

- How can Lynk & Co exploit its existing business model for future growth on the DK market?

- Which entry form is best suited for entering Denmark with the current business setup?

By considering and answering the research questions the main problem statement will be answered as well. They function as guiding questions in order for the researcher to make sure to study relevant areas of the topic.

2.2 Delimitation

In order for this research to be as concrete and relevant as possible the researcher has to set up delimitations. This is further in order to secure a coherent answering of the above questions.

Firstly, the main objective for this research is to study whether there is a fit between the Lynk & Co philosophy and the Danish market, therefore this research delaminates itself from all other countries than Denmark. The focus is the Danish market as a potential business opportunity as well as a study of the Danish consumer in relation to Lynk & Co.

Secondly, a segmentation analysis will not be conducted. The aim is not to come up with a marketing strategy. The thesis is focused upon researching the market in relation to technology and business modelling and the fit of Lynk & Co hereof on the Danish market.

Hence, the focus is on Internationalization theory although a description of the target audience is included.

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Thirdly, competitors at the Danish market will be touched upon, but not as an individual analysis. Therefore, the researcher deliminates itself from an in-depth analysis of each present competitor and keeps the analysis at an industry level through the use of Porters Five Forces (M. Porter, Competitive Strategy, The free press, 1980). The restriction is due to the page limitations of the thesis.

3. Literature review

The purpose of the literature review is to present and relate the existing academic research that has been conducted in recent years within the topics of entry to foreign country, technology and business modelling. Various research work will have its focus on the global landscape and contribute with a general phenomenon within the above topics, whereas others will have focus on Denmark specifically. Over the years in relation to the exploration of the use of technology, it seems that academic literature covering this have expanded into related topics like; the development of sustainable fuel sources within the automotive industry, carsharing technology and the consumers’ willingness thereof, whether technological change brings organizational change, the need for adjusting the business model, new product innovations, readiness of consumer in new technology, cultural use of car and more.

Wells and Nieuwenhuis (2012) argue that in general on the topic of technological forecasting and social change, research conducted have a tendency to focus on the consequences of change at the expends of understanding the reasons and significance of continuity (Wells & Nieuwenhuis, 2012) This point of view is analysed in depth within the automotive industry and especially the view of continuity and gaining an sustainable advantage through the use of technology and innovation business modelling are direct relatable to this research.

Wells and Nieuwenhuis furthermore argue that there is a need for change and especially in the car industry, due to consumer demands and substituting competitors/solutions.

Furthermore, Oltra and Saint Jean (Oltra & Saint Jean, 2009) argue based on a case study within the French automotive industry, that three elements are of importance for future car companies to consider; technology, demand conditions and environmental &

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is why, among others, these elements will be studied and put in the context of entry to Denmark. Whereas this point of view lacks to include business modelling, other literature including Wells and Nieuwenhuis (2012), N. Abdelkafi, S. Makhotin & T. Posselt (2013) and E.

Giesen, E. Riddleberger, R. Christner & R. Bell (2010) are arguing of the importance of considering a new approach to business modelling both in general and especially for the car industry due to digitalization.

On the matter of carsharing, Shaheen & Cohen (2012) argue that the future will consist of more and more carsharing due to the positive gain of consumers lowering their living costs and gain mobility. This is already seen with the pop up of many independent carsharing services, whereas the automotive companies have yet to enter this space. (Shaheen &

Cohen, 2012)

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4. Theories and models

In the following theories used to answer the research questions and, in the end, contribute to understanding factors impacting the business environment through academic literature will be examined. Theories will be accompanied by primary and secondary data in order to create a solid empirical foundation and further to be able to make a conclusive thesis that incapsulates main areas of the researched topic.

As written prior in the thesis, the analysis section follows a cube approach whereas literature in each section of the cube will be discussed.

On the next page, a full easy-to-read overview of applied theories and models are visualized. By doing so, the reader is able to get a clear overview with respect to theories and models used in each section.

The conducted overview is followed by a description of how theories and models are applied in order to create the mot value for the development of this thesis.

A) Danish car

market B) Technological

change C) The innovative business

model

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4.1 Overview of theories & models

Theories

Section C Business model

innovation Section B The technological

change Section A The Danish automotive

market

Models

PESTEL analyses Gert Hofstede

cultural dimensions Porters Five forces

(Porter, M. 1979)

Core competences (Prahalad, C. K.,

Hamel, 1990)

PLC curve (Morley, 1960)

Innovation adaption curve (E. Rogers,

1962) Open innovation

(Chesbrough, 2003)

Disruptive innovation (C. Christensen, 1995)

Capturing value from business model innovation (Chesbrough

& Rosenbloom, 2002)

Business model canvas (Alexander

Osterwalder 2010)

Section D Strategy development

SWOT analysis (A. Humphrey, 1960) Commonalities (Williams

& Grégoire, 2015) Mental distance and risk

(Johanson & Valhne First mover advantage

(Lieberman &

Montgomery, 1998)

Gravity model (Walter Isard, 1954)

Product-to-market possibilities based on the innovation

potential.

(Loch and Kavadias, 2010)

TOWS analysis (H. Weirich 1960) Generic strategies

(M. Porter, 1960) Growth strategy Internationalization motives

(J. Dunning, 1993)

Value chain analysis (M. Porter, 1985)

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4.2 A) The Danish automotive market

In order to assess whether or not Denmark is suitable for entry, its necessary to analyse structures and factors impacting the business environment and specifically being able to map out factors that characterize Denmark as a market. In other words, to estimate the market potential and fit between brand (and hereby its philosophy), country and

consumer.

To succeed with the above It is considered relevant to conduct a PESTEL analysis (F.

Aguilar, 1967) as main element in this section, in order to provide an overview of relevant factors that have the potential to influence the company and its value creation at the Danish market. Furthermore, in order to assess cultural differences and/or more specifically pin-point Danish cultural dimensions, Gert Hofstede and the five cultural dimensions will be analysed.

When entering into a new market it is furthermore crucial to understand the competitive situation. Therefore, the theory of Porters Five Forces will form the basis of the researcher’s competitive awareness (Porter, Michael, E. 1979).

4.3 B) The Technological change

This section of the thesis will cover the technological change seen in recent time in the world and furthermore how its development can be utilized by firms in general and specifically how Lynk & Co can exploit this with respect to the Danish market.

The approach of an outside-in view with a mix of global phenomenon’s and the behaviour of the Danish consumer will derive value drivers that are helpful in the assessment of Lynk & Co’s possibilities within the use of technology.

The theory of core competences (Prahalad, C. K., Hamel, 1990) and how to leverage this to Lynk & Co’s advantage are assessed and function in collaboration with the outlook of the technological advancement in the world as strategic guidance for entry strategy assessment.

In relation to the use of technology and the Danish consumer, the theory of the PLC curve (Morley, 1960) and the innovation adaption curve also referred to as “Multi-step-flow-

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theory” or “Diffusion of Innovations theory” (E. Rogers, 1962) are applied. This is furthermore to demonstrate the maturity of product and the technological fit with the consumer.

Innovation theory such as the paradigm of “Open innovation” and hereby the impact of collaborations and ultimately how a technology strategy can affect the market fit of Lynk

& Co will be applied by looking at licensing and intellectual property management (Chesbrough, 2003). Furthermore, classification of Lynk & Co innovation level will be assessed through the use of Clayton Christensen theories about disruptive innovations.

4.4 C) Business model innovation

In the following, theories and models will be described in order to highlight important theoretical literature in the context of business modelling.

The purpose of this section is to evaluate the existing business model of Lynk & Co and whether or not the Danish consumer/market are receptive to this approach.

Academic research and literature will be included like theories developed by Chesbrough

& Rosenbloom,), Johnson, Christensen & Kagermann (Harvard Business Review, 2008).

Through this, the author looks at the importance and techniques of securing the continued development of business models.

The business model canvas developed by Osterwalder, Yves Pigneur et al. (2010) will be created in order to get an overview of the full model and furthermore to better evaluate the fit between Lynk & Co and Denmark as a potential market for entry.

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4.5 D) Strategy development

Through the use of a SWOT, value drivers from each side of the cube will be put into this model in order to assess strengths, weaknesses, opportunities and threats.

Based on the above analyse, several theories will be included to address the best possible entry strategy.

This will be analysed through theory that explains possible internationalization strategy of Lynk & Co to Denmark. This includes theory about commonalities by Williams and Grégoire (2015) theory by Johanson & Valhne (2009) about mental distance and risk and last but not least theory about entry-modes.

5. Structure and methodology

5.1 Structure of thesis

In the following section the structure of the entire research will be described in order for the reader early on to get an overview and for the researcher to maintain the red thread throughout the entire thesis.

As seen in the previous section, an introduction to the company manages to provide a clear understanding of the company incl. features, philosophy, company constellation and a quick toplined look into the challenges that the automotive industry are facing.

Next section is where problem identification and problem statement are being defined and elaborated. By answering research questions, the reader will be taken through the thesis and by doing so, the researcher has managed to answer the main problem statement.

Next up is the literature review where the researcher is selecting relevant academic theories and point-of views that will be discussed and compared with the research conducted in this thesis. The desired outcome is to view the problem statement from different angles and derive qualified insights from the researched topics.

Having a strong and streamlined structure and methodology is important in order for the researcher to uphold an academically strong foundation of the conducted research.

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Furthermore, the methodology section provides an understanding of the reasoning of selected and deselection of approaches, views and more.

The analysis will follow a cube approach, where the researcher is assessing each area independently, with no or minor links to each other. After each section value drivers will be extracted and later inserted into a SWOT.

Assessment and a possible entry strategy based on the above analyses and academic literature, will be presented together with a forecasting of the sales potential of DK as a market.

As seen below the structure can be visualized through the use of the Pentathlon framework. Each section of the research is distributed within the framework.

Ideas: Introduction (1), Problem identification and statement (2).

Prioritization: Literature review (3), theories & models (4), structure & methodology (5), The Danish market (6)

Innovation Strategy: The technological change and its impact on the automotive industry (7).

People & Organisation: Business Model Innovation (8).

Innovation Strategy

Chapter:

1,2

Chapter: 7

Chapter:

9,10

Ideas Prioritization

Chapter: 8

Implementation

People & organisation

Chapter: 3,4,5,6

Figure 1- Structure overview using Pentathlon framework

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Implementation: Identification of value drivers (9), Market entry strategy considerations (10).

5.2 Research philosophy

The following section contains both the scientific and theoretical approach of the thesis. In the process of answering the problem statement and to ensure solid methodology, the research onion by Mark Saunders (2007) is applied. Furthermore, in order for the reader to get a better understanding and overview of the entire research, a research path is showcased in figure 1.

Saunders (2007) suggests different research philosophies, whereas they all cover different point of views on the world around us and how this affects the researcher.

The view of Epistemology is the most suitable for this research due to the fact that It taps into how you as a researcher manage to figure out how the world works, and furthermore how society impacts its surroundings. Phenomenon’s and trends have a huge say on the direction of consumer demand and are direct related to how society impacts its surroundings. It can furthermore be connected to B) The

Figure 2: The Research Onion by Mark Saunders (2007)

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technological change and C) development of business model innovations with the impact of digitalization.

When using this philosophy, the researcher acknowledges that how you as a

researcher see and interpret acceptable knowledge within a field of study, is centre of focus. Similar point of view is also true for the pragmatic philosophy and the

investigation of the “how”. It serves the purpose of seeing various angles in order to answer the “how”. As a researcher you normally see multiple research methods used in this relation, whereas they also often complement each other. This is also true for this research. The pragmatic philosophy furthermore argues that when the research questions do not have a specific philosophy that it should adopt and the fact that it is possible to have different philosophical positions, then it matches the pragmatist philosophy. It is important for the researcher of this thesis to state that there is no single way of interpreting the world and no single point of view that are able to give the full picture due to the fact that multiple realities may exist.

In relation to this specific philosophy, the thesis focus on a problem and the aim is to deliver a practical solution that provides a strategic assessment and

recommendation.

5.3 Research approach

When doing a research, the approach of how you obtain knowledge is of

importance. It can be characterized by the fact that it is the relationship between the actual research conducted and the theory applied.

The research approach selected for this thesis is based on an inductive research approach. Due to the fact that the purpose of this research is to uncover patterns found in data and observations in order to broaden generalizations and theories, it is estimated that this approach will answer the research questions in the most effective way. (Saunders et al., 2009, pp. 124-126). The researcher will be able to test real life issues with existing theory. Based on the findings the researcher will then be able to formulate a recommendation and a plausible explanation of the

researched topic.

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5.4 Research strategy

Several research strategies can be leveraged when obtaining knowledge and data, whereas this thesis take advantage of multiple strategies that complement each other. Within this thesis the single-case study strategy with a main focus on Lynk & Co will be used in combination with a survey and archival research strategy.

The focus will be to explain and investigate situations concerning specific factors like market fit based on technology and business modelling. Perspectivation and inclusion of case study articles on related topics are included to create a

generalisation, and furthermore to be able to specify and answer the specific

research questions. In the enrichment process of obtaining relevant knowledge, one can consider this as an empirical study. Hence, multiple information sources are included in order to answer the research questions (Andersen, 2008, p. 118).

By following these strategies, it is the aim of the researcher to gain insight on the entry considerations and factors affecting it.

5.5 Methodical choice

When conducting the research, the methodical choice is of importance due to the fact that the output determines how valid your findings will be.

The mix of numerical data and non-numeric data are characterized as quantitative and qualitative data. This will be used to test theoretical findings and to clarify and understand consumer preferences. Referring to the “research onion”, the

methodical choice appropriate for gaining the most value in this context is by using the mixed method research design. (Saunders et all, 2016, p. 170) Furthermore using both explorative and descriptive research contribute to the fact that the validity is elevated, and the researcher manages to see the research questions from multiple angles. The market-fit can be put in relation to exploring sales potential, hence the explorative study. Whereas in collaboration with the descriptive study, the

researcher can investigate prior phenomena to explain causes of events.

It is acknowledged that in order to avoid method-bias, the mixed method research design is favoured. This is another reason for choosing a mix of primary and

secondary data to enrich findings (Saunders et al., 2009, p. 151).

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The developed consumer survey will explore the behaviour and need of Lynk & Co features/philosophy and furthermore establish a reasoning of the willingness to buy the cars of Lynk & Co based on the attributes it offers.

Expert interviews are used to explain and verify development on the Danish

automotive market and further to comment on the general experienced consumer needs in the industry.

5.6 Time horizon

Depending on the choice of methods in thesis and the availability of data, one can choose between different time horizons. Due to the fact that the researcher is trying to capture present and historical findings to create new theories, the chosen time horizon will be a mix between cross-sectional and longitudinal study. By doing so, the researcher is picturing the factors contributing to answering the research

questions and the long-term development and trends (Saunders et al., 2009, p. 155).

Qualitative inputs such as the consumer survey and expert interviews are included as the cross-sectional study, whereas analysing of available data to explore market trends will be included as longitudinal studies.

5.7 Data collection

In the following, the data collection methods will be presented and specified in detail. It will be based on the above-mentioned mix method approach and

combine both qualitative and quantitative collection methods. The applied use of these will be outlined and specified (Andersen, 2008, p. 149).

All data collection including Interviews and survey have been conducted in English to avoid errors in a possible translation process.

5.7.1 Interview – Primary data

The researcher conducts multiple interviews during the research process, which all aspire to attribute with qualified knowledge of market and trends in order to answer research questions. Interviewees will mainly comprise of external experts and will be interviewed over the phone.

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It is considered positive that interviewees cover different areas of the business market, due to the fact that this will contribute with different angles and perspectives on each topic.

External experts

Output derived from interviews will add specific market, technological and business model knowledge that will be added to each section of the cube approach. The interviewees are:

- Torben Kudsk, Department director, FDM

- Jan Walsøe, Former Sales Director, Semler distribution (Porsche) - Kristian Mehlsen, Consultant, Copenhagen Institute for future studies,

Internal expert

- Sebastian Hammer, Marketing Manager, Lynk & Co

Interview approach

An essential prerequisite for making a good interview is that the topic of the interview is something that the interviewer himself and others want to gain additional knowledge upon. To have good interview projects one must have pragmatic and communicative validity - It is valid because interviews teach us something about the human’s perspective on the world and because it affects the development of theories within specific areas (S. Brinkman, L. Tanggaard, 2013).

Therefore, in order to gain the maximum effect of an interview, the researcher have prepared preliminary research on the subject of the Danish automotive market, the technological change and innovation business modelling.

The actual interview will be conducted with a briefing, interview and debriefing (Kvale, 2009, pp. 148-150).

The interview initially starts with a briefing consisting of an introduction to the project and to what purpose the interview will serve.

Concerning the actual interview, the researcher follows a semi-structured interview approach. The guide will be constructed with questions divided in themes in order to gain an overview over questions and its substance. This split leads to more clear

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and precise answers. The questions should promote a positive interaction with the subject and motivate the interviewees to talk about their experiences and feelings.

(Kvale & Brinkman, 2009)

After the interview, a debriefing containing a full summery of the interview, split in themes will be send by email to the interviewee in order to give the interviewee the option to elaborate specific answers if needed.

5.7.2 Consumer survey – Primary data

The consumer survey has several links to the development of a paper survey.

However, the web-based survey has several additional options that both elevates the visual expression of the survey, but also limits the errors within answers, due to response controls such as avoiding the interviewee to answer several times, when only one answer is allowed (Jelke Bethlehem, 2009, p. 191). Such controls will be installed and ensure lower error-rate.

When developing the actual web-survey, a focus on short questions, avoiding combined questions and furthermore a focus on avoiding double negative

questions are required in order to ensure lower error-rate. The latter creates more confusion and doesn’t add additional value by doing so. (ibid) The web survey will follow the structure below:

- Instructions and Introduction

- Questions regarding the Danish consumer in relation to Lynk & Co.

o Willingness to buy environmentally friendly cars

o Whether or not Lynk & Co features are suitable for Danish consumers - Questions about the willingness to use attributes in cars derived from

technology.

- Questions about the Danish consumer and whether or not they accept the new way of buying cars (subscription based and less physical stores)?

The target audience of the survey will be the Danish consumer between 18 and 45 years old. It is preferred that the majority of respondents will include young

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millennials between 23 and 38 years old, due to the fact that these, at the time of the research, have lowest barriers when addressing technology.

This survey will function as a sample of the market and act as guidance to the researcher in regard to the preferences and state of mind of the Danish consumer.

The web-based survey can reach several respondents through the use of digital medias like email and social media (Bethlehem, 2009, p. 23).

The conducted consumer survey can be seen in appendix 8.

5.7.3 Validity and reliability

For a research project, inputs used to create findings and recommendations have to have some kind of quality in order for the research to be reliable and valid and furthermore accepted by the public. Therefore, both process and approach need to be centre of focus in order to maintain the needed level of quality. High quality and credibility of inputs elevate the credibility of outputs after conducted research.

Validity – The focus here, is to make sure that the researcher measures what he wants to measure and uses the right tools for accurate measuring (Saunders et all, 2016, p.193).

Within this thesis, a high focus has been put into the optimization of the process and making it as accurate as possible in relation to what is wanted to be measured. Validity is furthermore a measure of the researcher’s ability to extract relevant knowledge and experiences from participants in the research to enrich findings and create a valid foundation from where the researcher makes his recommendations. Interviewees within this thesis have been carefully selected with a focus on relatability and expertise in relation to the subject. Through the conducted expert interviews the researcher manages to

explore the interviewees’ reality and gain relevant input in order to draw qualified conclusions. The expert interviews are used for verification purposes in relation to the conducted online survey.

Furthermore, relevant and respected academic literature is included to gain other researchers’ input on similar topics of this thesis. By doing so, the researcher creates a more solid foundation and, in the end, elevates the general validity of the thesis.

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In order to quantify and relate findings/value drivers, a 5-level scoring system is

conducted. This scoring attributes to the validity of the project and furthermore acts as an overview of value drivers after each conducted analysis.

Reliability – By having a high reliability, other researchers would be able to replicate or repeat research based on the consistency in findings through the use of data collection methods and techniques.

The reliability of this thesis has been approached with transparency in mind.

The researcher has tried to outline the various stages of the methodology to accommodate the possibility of other researchers to repeat the same study.

It is acknowledged that within a semi-structured interview, findings would be difficult to replicate due to the fact that it reflects reality at a specific period. Additionally, the world situation would likely not look the same at a later period in time (Saunders et al p. 382).

However, an extensive description of the methodology is present and other researchers would easily be able to replicate the project with this at hand.

6. The Danish market (Section A)

The following sections will follow the cube approach whereas the structure follows each side of the cube; A) The Danish marked, B) The technological change, C) Business model innovation.

First section will include an assessment of the Danish market and what external factors Lynk & Co have to consider when doing a possible entry.

The first sub-question will be answered through an analysis based on a mix of primary and secondary data.

The aim of this section is to establish sufficient knowledge of the Danish marked in order for Lynk & Co to evaluate and consider if Denmark would be a match for brand and

consumer.

5. Very

important 4. Important 3. Relevant

Level of importance

2. Not as

important 1. Not

important

Figure 3 - Assessment of validity

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The Danish marked will be analysed through the use of PESTEL, theory about culture and also an assessment of the competitive landscape in Denmark will be made through the use of Porters Five Forces.

6.1 Macro analysis

6.1.1 Political environment

Denmark is not a presidential democracy, but rather a parliamentary system with various parties and ideologies. The Danish government has the Liberal Party led by “Lars Lykke Rasmussen” in office as Prime Minister. The centre-right coalition are backed by the Liberal Alliance and the Conservative Party, whereas this government have had its power since 2016 (Economist Intelligence Unit, 2019).

The current government affects activities in various industry sectors including the

automotive industry. The government gives priority to the use of state finances and at the same time sets the direction for the country's political framework. As early as June 2019, an upcoming election arises, and sources are estimating that Social Democrats (red bloc) wants to rule alone due to tensions internally in the party. This is considered highly unstable and would potentially not last the four-year legislative term (Ibid). This may affect the automotive industry, due to potential changes in the taxation regulation.

The acting government has invested 110 billion DKK in developing a well-functioning infrastructure due to its importance for prosperity, cohesion and continued growth in Denmark. An infrastructure that supports efficient transport for both citizens and business is a key element for effective production (Transport, Bygnings og boligministeriet, 2019).

A large number of infrastructure projects will be launched in the period from 2021 to 2030, whereas developing new roads and expansion of existing roads will create more space for cars. By doing so it shows a picture of the government’s confidence in a larger use of automobiles in Denmark.

The Liberal Alliance Party has tried for years to lower the enormous taxation on cars with moderate success. The current taxation is 150% going down from 180%. “Last year, Samuelsen told the press that his party supported the complete removal of the 180 percent tax rate, calling it “completely senseless”” (The Local, 2016).

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The Danish Government is in general pro sustainability and is giving several incentives for starting/change businesses that seek to take sustainable initiatives.

The whole world has to go through a green energy transformation, either for climate reasons or because of a lack of fossil energy. The Danish market has great options and flexibility to develop relevant policies to accommodate this.

In terms of electrical use of cars (EV’s), the Danish government created a 20% deduction of the full taxation in order to reward EV owners (Motor magasinet, 2019). Back in 2014 an even greater discount was given to EV owners, and due to that legislation, the sales of EVs saw a significant boost in sales in Denmark.

The boost in sales shows a demand for EV’s in Denmark, but the automotive industry was not ready to favour EVs over gasoline cars just yet (FMD, 2019).

The legislation was overturned and just now from 1st of January 2019, the above-

mentioned deduction of 20% was applied. Industry experts are expecting increased sales of EVs due to this new legislation (Ibid).

Compared to Norway with a 49% of its car fleet being EVs, Denmark only has 2% EVs on the Danish roads (Avto-wow.com, 2019).

6.1.2 Economic and demographic environment

The economic landscape of Denmark has relations to the established finance policies and legal conditions whereas this affects the economic development.

The infrastructure investment mentioned earlier will contribute with a derived efficiency and increase in company productivity.

Figure 4 - Taxation example based on Chinese price of 25.000 Euros outside DK.

Price of car: 150.000 DKK

PPPrsssaaaa Taxation: 200.000 DKK VAT: 25.000 DKK

Estimated price:

375.000 DKK

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The Danish economic foundation is considered strong with a dynamic labour market and a record high employment rate (Economist Intelligence Unit, 2019).

As Hans Peter Kay, Commercial Director says; “One of the major qualities of doing business in Denmark is our flexible and competent labour market which minimise risk and cost for companies. When establishing a business in Denmark, a foreign company will experience competitive labour costs and high productivity levels, making the Danish workforce one of the most efficient in Europe” (Ministry of foreign affairs in Denmark, 2018). A commentary on the fact that Denmark is on a 10th place on World Economic Forum’s competitiveness scoring of countries (Weforum.org, 2018).

Investments are estimated to increase to 6% within 2019 which is considered strong (ibid).

Denmark were, as well as the entire European union, hit by the financial crisis in 2007.

Nevertheless, in the post-crisis period of 2010-2016 real GDP managed to have a steady growth of 1.2% per year on average. The economy managed to increase its growth to include a 2.3% growth on average per year.

The Danish household income was DKK 501,471 before tax last year, which is an increase based on the past few years. Nevertheless, households have not increased their

consumption accordingly, which means the Danish consumers are saving more money, than they spend (2018). Nevertheless, economists are estimating consumption will grow by 2.5 per cent in 2019 and 2.4 per cent in 2020 (Confederation of Danish Industry, 2018).

Denmark’s International relations and foreign policy aim at an active EU and NATO membership and a close transatlantic relationship (Economist Intelligence Unit, 2019).

Whereas relationships between US and EU have experienced tensions due to an

agreement on eliminating barriers to bilateral trade on non-automotive industrial goods (ibid). This will ease the trade and furthermore boost trades between US and the common market.

China and Denmark have experienced increased trade over the last 20 years, which is why China has become the 7th biggest export destination, whereas China is now the 4th biggest source of imports to Denmark (ibid). Relationships are strong and based on mutual gain (Confederation of Danish Industry, 2018).

Danish automotive import from Belgium holds a 2nd place of the total imports within this industry. Due to the fact that Lynk & Co uses the Belgian Volvo production facility to serve

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mention (Worldrichestcountries.com, 2016).

Lower barriers and free movement of goods within EU, and in this relation Denmark to Belgium, increase competitiveness compared to imports from China or US. Hence

products from outside the EU would experience tariffs and add costs to products, which in the end derives more expensive products for the consumer.

Denmark has a population of 5.8 million people, whereas 602.481 live in the capital of Copenhagen. Denmark's Statistics most recent population-projection shows that the population is expected to grow by 279,000 or 4.8 per cent over the next ten years. It is primarily the oldest population that will increase significantly. The group of over 80s alone is expected to grow by 150,000 over the next ten years, corresponding to 58 per cent more than today. The elderly population above 65+ are taking up 19.3% of the full population of Denmark. A very small change in age towards the younger segment is present within the capital of Copenhagen. (Denmark Statistics, 2019)

6.1.3 Social and Cultural environment

There is a tendency in Denmark toward small changes within the gender distribution in the labour market. It is a bit of a paradox that it moves so slowly, but we can observe that there is an inertness and that Denmark has one of the most gender-segregated labour markets in the Nordic region. Although there are plenty of choices for the individual (DR, 2019). Danish people still choose industry based on what is grounded unconsciously in their minds (ibid). In other words, according to gender researcher, Stine Thidemann Faber;

“it reflects the social norms that we encounter through childhood and up to the school's educational guidance, where we make the first crucial choices about what we want to work with”.

Figure 5 - Source: Denmark Statistics, 2019

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In Denmark, equality is a large topic within the parliament and within the society in general. It has been so since the late 18 hundred. Denmark has a welfare state in place where all citizens have certain basic social rights/welfare benefits guaranteed by the state. One could say that a welfare state provides the things that the market cannot provide satisfactorily. This provides basic needs to everyone, even though you have a low social status. This is managed by having one of the highest taxation systems in the world.

Partly due to this, the equality remains and based on the OECD listing of countries, Denmark is the 6th equal country in the world (OECD, 2018). In other words, this system makes it attractive to work and live in Denmark and may grant Lynk & Co with easy access to a qualified employer base.

The Danish consumers are getting more and more environmental/ethical aware and act as “the political consumer” where e.g. politically incorrect companies get boycotted, due to their lack of environmental/ethical correct initiatives (International Markedsføring, 2009).

By looking at the conducted survey about the Danish consumer, 80% of respondents value sustainable and environmentally friendly products like Lynk & Co (Conducted survey, appendix 8, Q23).

Lastly, by looking at the culture behaviours of Danish consumers/companies through Gert Hofstede Five culture dimensions, the researcher sees almost similar scoring when

comparing Denmark and Sweden with only minor differences (hofstede-insights.com, 2019). Danish consumers are more masculine compared to Swedish consumers.

By having a moderate score on “long term orientation”, means that Danish/Swedish consumers encourage thrift and efforts in modern education as a way to prepare for the

China Denmark Sweden

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future (Gert Hofstede, 1973). This finding can shed light on the fact that Danish/Swedish consumers are ready for the future and encourage various elements that can be derived from preparing for the future. Hence, technological and digitalization may have lower barriers when looking at the Danish marked (Ibid).

Since the Chairman of Geely have left main decisions in Goteborg, Chinese culture wont mettle too much with the company.

“Management style differs and e.g. managers in Sweden trust their colleagues, discussions with team members are expected, and there exists an informal culture, whereas this is not the case for China - Power distance.” (Elias N.V. Poulsen, 2019).

6.1.4 The technological environment

The Danish ability to adopt new technology and innovate is a strong advocate for doing business in Denmark as seen with the ranking of Denmark as 10th best place to do business.

(World Economic Forum, 2019)

Danes are in general first movers on digitalization, but as Torben Lund Kudsk, FDM Director says in a conducted interview: “The Danes are quite conservative within the car industry.

Even though digitalization is present, cars might be an exception. Tesla was the first car maker to introduce a full digital solution, but the success could mainly be attributed by a low pricing due to taxation benefits of having an EV” (Appendix 3, Q5). When looking at the conducted survey, the Danish acceptance of digitalization in cars, argue that the consumers ARE ready for harvesting the benefits derived from adding digitalization in cars (Conducted survey, appendix 8, Q19, Q20 & 25). Furthermore, use of sharing economy and accepting the change in traditional habits, do apply to Danish consumers, which therefore contribute to the thought that Lynk & Co features have lower barriers in order to get adopted (Ibid).

6.1.5 Environmental environment

Concerns in relation to the environment have increased, which has led to an increased focus from both government and companies. Companies with CSR or environmental initiatives will more likely be preferable for a Danish consumer (CSR.dk, 2016).

Furthermore, the focus of minimizing the carbon footprint and many other environmental

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factors are of increasing importance for the Danish Consumer (Ibid).

The environmental awareness from the government and the consumer contribute to the fact that Danes value the environment and want to preserve it.

Lynk & Co’s EVs (electric vehicles) can potentially be a great substitution for regular gasoline driven cars. This serves as an indication of a match between Lynk & Co electric cars and Denmark’s focus on sustainable energy/fuel sources.

The World Bank published a new report concluding that Denmark is the leading nation in the world when it comes to access to energy, energy efficiency and renewable energy (Altinget, 2017). In 2015, Denmark exported energy technology for a total of DKK 71.4 billion and energy exports accounted for 11.1 per cent of total Danish goods exports for 2015 (ibid). Access to electricity is an important factor to consider for Lynk & Co.

The domestic prices of electricity are lower when a country has overproduction of electricity as seen with Denmark. The consumer would need recharging stations for the EVs and for this reason, the author estimates this finding to be of importance to Lynk & Co.

6.1.6 Legal environment

Any company has to comply with the newly established GDPR regulations (Datatilsynet, 2019). This new regulation can potentially create barriers for acceptance of Lynk & Co features. The regulations contain restrains on data collection and could cause problems in relation to the collection of consumer-related data (Kristian Mehlsen, appendix 4). Lynk &

Co are currently present at the Chinese market with its digital attributes in cars, but for the entry to Europe and hereby Denmark, data-regulations have to be considered in order to asses if product/features need to be adjusted.

The technological development in general is going forward in a fast pace and the transformation of the legal system to adjust to the new possibilities is an ongoing

challenge. Denmark though, encourages technology and particularly on the sustainable energy area, like e.g. electrifying cars, Denmark makes regulations that benefit EV owners.

6.2 Competition within the Danish car market

The following sections contain an analysis of the Danish car market with a focus on the competitive situation within the industry. The analysis will follow the framework developed

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by Michael E. Porter named “Porters Five Forces” (M. Porter, Competitive Strategy, The free press, 1980).

6.2.1 Competitive situation within the car industry

Introduction to the Danish car market

Denmark has approximately 3 million cars driving on the Danish roads, whereas 2.5 million are passenger cars (FDM, 2018).

“The ratio of cars is one of the lowest in Europe, but this should not be a sign of Danish people being less fond of their cars compared to their European compatriots”, says cars expert Christian Grau (DR.dk, 2018).

Cars are expensive due to the high taxation, which is one of the reasons why some Danes might choose other alternative transportation options like biking, public transportation, car-sharing and alike (ibid).

Denmark is characterized by having a wide range of available car brands, whereas VW have the most cars on Danish roads (FMD, 2018).

Looking at the Danish consumers assessment of their car

experiences, the list includes which brands they like the most: 1.

BMW 2. Volvo 3. Mercedes-Benz 4. Audi… 8. VW (Autoindex, 2018) Approximately 58.6% of Danish car purchases are between

100,000 and 400,000 DKK, of which sales of the mini, middle and SUV class account for 64.9% (Bilbasen report, 2018).

The Danish sale of cars experienced a small decrease of -0,3%

from 2017-2019 (Danmark statistik, 2019). On average, 133.000 private cars (mix of

purchase and leasing) have been sold each year over the last two years (ibid) and 88.100 cars have been sold for commercial use. Totalling 221.200 cars sold from 2018-2019. (ibid) Dealer network

The current dealer network is characterized by a mix of fully owned subsidiaries and licensing agreements. The traditional setup is based on an importer/middleman that gets exclusive rights to sell to dealers, whereas dealers sell to the end-costumer (C. Hangaard, 2019). This can be characterized as the traditional way car brands distribute cars in

Figure 6 - Top 10 of the most popular car brands on Danish roads (Total amount) 2018

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Denmark. The five biggest car importers based on revenue include; Semler holding (VW, Audi, Porsche, SEAT, Skoda, Lamborghini, Bentley, Lotus), Interdan holding (Peugeot, Citroen, Mitsubishi, DS), B. Christiansen holding (Hyundai, BMW, Land Rover, Jaguar), Ejner Hessel holding (Mercedes, Renault, Dacia) and Mercedes-Benz Danmark A/S (Mercedes) (Finans.dk, 2018).

6.2.3 Rivalry in the industry

The rivalry in the industry takes place between providers offering the same product, hence categorized as narrow competition. The rivalry within the industry are based on various focus-points including price-competition, brand profile and innovation capabilities.

Differentiation among the various segments exists. In recent years the Danish market has had a significant increase in micro and mini segment with models like, VW Up, Toyota Aygo and Skoda CityGo. This is due to the fact that the Danish consumer are very price sensitive derived from the high taxation. (Interview with Torben Kudsk, FDM, 2019) But for the first time, SUV (including “crossover”) have gained

market and is now the most desired type of car in Denmark.

(FDM, 2018).

Lynk & Co’s main car model is a SUV, whereas this development fits perfectly into Lynk & Co’s strategy of entering with a SUV.

Price is of importance, not only on smaller car models, but on all cars in Denmark. The Danish consumer is looking for a good bargain and expects high consumer service levels, but on the other hand, it is also of importance to the consumers that cars have the new technological options, which

normally wouldn’t exist in the “mini cars” mentioned above (Conducted survey, 2019, appendix 8, Q25). Brands like Peugeot, Toyota, Skoda, Ford, Citroen, Renault, Opel, Nissan, Suzuki, Hyundai, Kia, Mazda, SEAT, Fiat, Dacia and Honda are all having an intensive price strategy and are mainly competing with this in mind (ibid). Whereas brands like BMW, Volvo, Mercedes-Benz, Audi, Tesla, Porsche and VW are competing on both their brand profile and their innovation capabilities (ibid). Hence, monopolistic competition.

Sale by type (%)

2017 2018 SUV 17,3 % 26,8%

Mini 27,1% 25,7%

Middle 19,1% 17,2%

Big 9,5% 10,6%

Micro 17,2% 10,1%

MVP 6,3% 6,1%

Premium 2,2% 2,4%

Figure 7 - 2018 sales figures of cars by type (%). Source: FDM.dk

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